A West Midlands stock exchange could be up and running as early as next year, according to the development agency, Advantage West Midlands.

The exchange - provisionally known as the Local Business Exchange - would list shares in Midlands companies which lack the track record or funds to list on the London Stock Exchange, or the Alternative Investment Market.

AWM has agreed to fund feasibility studies into the idea of a low-cost, internet-based service for both Stock Exchange-listed and private companies with a view to injecting &#xA3;3.2 million into the initiative over three years.

Companies looking to raise investment cash would be able to use the market as a first port of call while companies already listed on the Stock Exchange could improve their prospects by gaining easier access to the pool of investors interested in West Midland companies.

This would provide the means for small and medium-sized companies in the region to raise share capital and fixed income capital in a cost-effective way.

John Edwards, AWM's chief executive, said: "The Local Business Exchange would be the ideal environment for companies to develop and expand.

"The regional agenda for action clearly identifies the need to increase the supply of risk capital. In attempting to achieve this, AWM has already launched the advantage growth fund this year which has made &#xA3;25 million available and we are looking to launch another set of funds worth around &#xA3;65 million early next year.

"Although the process is still at a very early stage, this is an early response to recommendations by the Department of Trade and Industry and we are committed to making sure the West Midlands is at the fore-front of new financial initiatives.